The grinding could be a number of things but I would check the clutch and the brakes.
Most RTR nitros use a simple 2-shoe clutch system that has a spring wrapped around it and they tend to go bad fast.
As for the brakes, make sure that when you're throttle trigger is neutral they aren't engaged . You may have to adjust the linkages to get this corrected.
The smoke coming from the tank is normal since nitro enginges use a pressure line from the exhaust to add pressure to the tank to facilitate flow to the carb.